France: Expert criticises Macron’s vaccine response
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Matthew Lynn said with France one of the most vaccine-sceptic nations in Europe, lagging as it does well behind the UK in terms of jabs administered, it was likely restrictions would remain in place for longer, fuelling a longer-term depression to the country’s economy and piling on further debt. In economics, a black swan is an unpredictable event which can have severe consequences.
Mr Lynn, writing in The Telegraph, said: “If anyone wants to put a small bet on the next ‘black swan’ to hit the markets, an implosion of French debt should be right at the top of the list.
“Anyone who follows the eurozone economy will be used to worrying about Italian debts, and this week will be no exception.”
Recently appointed Italian Prime Minister and former ECB President Mario Draghi was pushing borrowing up to unprecedented levels, with the result that Italy’s debt-to-GDP ratio were set to climb to 160 percent, higher even than after World War 1, Mr Lynn pointed out.
However, he said: “And yet France is busily matching it euro-for-euro.
“After borrowing another €211bn in 2020, and keeping up that rate in the first quarter of this year, it now owes €2.67 trillion, compared with €2.64trillion for Italy, and €2.3 trillion for Germany (and a mere €1.3 trillion for Spain).
“Of course, it is a larger economy, so the debt ratios are not so high. Its debt currently stands at 115 percent of GDP, well below Italy’s jaw-dropping levels.
“The trouble is, quantities matter as much as ratios. In truth, France’s debts could very easily turn sour.”
With Mr Macron’s administration struggling to cope with COVID-19, France was currently trying to prop up key sectors of its economy, most recently ploughing a billion euros into KLM-Air France.
According to Eurostat data, France was now the third biggest debtor in the world after the US and Japan, Mr Lynn pointed out.
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To compound matters, it was also the most “vaccine-sceptical” in the developed world, he pointed out, with one recent World Economic Forum suggesting just 40 percent of the population wanted a jab compared with 77 percent in the UK.
Mr Lynn said: “That may rise as the vaccines prove their worth.
“Even so, if the French continue to resist vaccination on the scale needed to hit herd immunity then Covid-19 will continue to circulate, even if at lower levels, and the country may have to keep restrictions in place for longer than its neighbours.
“The result? A deeper depression, and yet more debt.”
Meanwhile, France was wracked with uncertainty, given next year’s looming poll, and the fact no French president has been re-elected since Jacques Chirac in 2002.
Mr Lynn explained: “No other G7 country runs through leaders so quickly.
“Worse, Marine Le Pen, the major opposition leader, may have dropped her plan to pull out of the euro, but France remains the EU country where hostility to the single currency is strongest.
“If there is only the slightest risk of that €2.7 trillion of debt getting denominated into “new francs” then investors need to get out of the trade long before it happens.”
Right now, France “ticks all the boxes” for a crisis of confidence among investors, Mr Lynn suggested.
He concluded: ”Its massive debts could easily blow up any day – it is just a question of how and when.”
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